Jon Notley, the former commercial director at Zoopla, has revealed his new venture exclusively to EYE.
It is called Zero Deposit Scheme, aimed at the private rented sector and to be launched later this year.
While not first in the market – there are competitive offerings already gaining traction – it looks to have the firepower that others would struggle to match, thanks to Zoopla’s multi-million pound backing.
Essentially, it aims to solve the affordability issue for tenants who struggle to raise deposits, while giving landlords exactly the same benefits they get now from tenancy deposit schemes, including an independent dispute resolution service at the end of the tenancy.
Agents will also be paid referral fees for introducing the scheme to tenants.
With the Zero Deposit Scheme, incoming tenants will be given the choice of either paying the usual deposit – typically equivalent to six weeks’ rent – or the opportunity to buy a much cheaper insurance policy.
Notley, who left Zoopla at the end of March after a 12-year career in the property portal sector, said: “The cost of the insurance policy will be the equivalent of one week’s rent.
“The average deposit put down by a tenant is currently £1,200. With our product, they would therefore pay £200. It is all about choice, which would be carefully explained to the tenant.
“We have piloted how tenants would react to this at a six-branch letting agent in the midlands.
“It found that 60% of tenants would go for it; 20% answered ‘maybe’; and 20% would not go for it, because they preferred the existing deposit schemes.
“For most tenants, rents are climbing, and raising large sums of money for the deposit is a massive problem in the market.
“In our pilot, there was also evidence that even if the money was available for a deposit, many tenants prefer to hold on to it rather than lock it into a security deposit.”
Notley said that landlords would not lose out, because the insurance policy would cover them for six weeks, in exactly the same way traditional deposits do.
Landlords would also benefit from a key requirement that the tenant retains responsibility for the property.
Notley said: “At the end of the tenancy, if a landlord has a claim and this is accepted, then the tenant pays up.
“If the tenant rejects it or disagrees with some of the claim, then both parties go to ADR (Alternative Dispute Resolution), whose findings are binding.
“If the ADR process rules that the landlord should be paid by the tenant, then we will pay the sum to the landlord and then claim it from the tenant.”
Notley said that he is now in the process of confirming an ADR provider.
He does not believe that the option of tenants being able to buy an insurance at the start of their tenancy will be covered by the forthcoming fees ban.
He said: “I would be astonished, as the consultation itself refers to wanting to improve the situation regarding deposits.”
He added: “It would have been tempting to design a product to solve things purely from the tenant’s point of view, but that might not work for landlords and agents.
“We have designed the Zero Deposit Scheme to appeal to them, too.”
Zero Deposits Scheme is operated by a firm called Global Property Ventures, whose founders Ben Austin and Gavin Wiseman are now stepping into non-executive roles.
Notley is a director, and also CEO, while Simon Embley – also chairman of LSL Property Services – is an investor and non-executive chairman.
As an insurance scheme, it is regulated by the Financial Conduct Authority. Zero Deposit Scheme is under-written by the world’s second largest insurance company Munich Re.
The enterprise is also being significantly backed by Notley’s previous employers, ZPG.
Notley said that Zoopla have made a capital investment in Zero Deposits Scheme along with a number of other investors. ZPG announced their backing on Wednesday morning and Notley said further announcements about the investment round will be made.
As part of the exclusive deal with Zoopla, the scheme will be heavily promoted on its portals over the next four years, and there will also be invaluable integration into ZPG’s agency software products.
Notley underlined that agents will have an ‘on boarding process’ if they want to partner with Zero Deposits Scheme. For example, they will have to meet criteria such as proof of tenancy referencing, and undergo what he called a short period of light but essential training.
He emphasised that there will be no question of a hard sell: agents will be explaining the choice to tenants, and introducing but not selling the product.
Notley said: “There are other players in the market, but we believe we have USPs – notably with the way we have designed our product and in our partnerships with Zoopla and Munich Re.
“We know from the tests we have done that there is a huge appetite for Zero Deposits, and that the scheme overcomes a genuine problem.”